Innovate or get off the pot

Maybe it's self-indulgent or just plain meta, but I must post about my own post on another blog. On this Ipswitch Blog this morning, I wrote about the proposed merger of XM and Sirius, two underperforming satellite radio companies. Skipping the rhetorical flourishes, I can succinctly report to you that I called the idea stoopid. Why do two companies doing the same thing poorly think they can do it better together? The short answer seems to be, they can if they would be a monopoly.

It's actually not 100% clear to me that this merger would constitute a monopoly since there are plenty of AM, FM and HD radio stations, plus all kinds of other music and audio delivery systems like CDs, podcasts, and *gasp* live listening. If it's not a monopoly, Sirus and XM won't gain much by reducing their mutual compeition, and listeners will likely lose some variety.

What bothers me more is the question posed in a strategy class back in business school. I think it was 15.912, which I'm sure you know is world-famous at MIT. The question was, why don't bad companies just pack it in and give the money back to the shareholders before they waste what's left?

I don't think satellite radio is a bad idea. I don't think subscription is a bad model compared to advertising supported. But XM and Sirius have lost about 30% of their share value over the past year, so there's something they're not doing right, and I seriously doubt that doing it not right together will work better for them.

Innovate or get off the pot. If you can't make your investors' money work for them, make way for somebody who can.

1 Response

  1. NSAreject
    "In-Stat: Digital Radio Set to Take Off"<br/><br/>"In 2006, 73 percent of respondents to an In-Stat U.S. consumer survey were aware of HD Radio on some level."<br/><br/>http://beradio.com/eyeoniboc/instat-digital-radio-set/<br/><br/>"Sirius, XM, and HD: Consumer interest reality check" (Alexaholic)<br/><br/>"While interest in satellite radio is diminishing, interest in HD shows no signs of a pulse."<br/><br/>http://www.hear2.com/2007/02/sirius_xm_and_h.html#comments<br/><br/>This just confirms, the lack of interest for HD Radio, on Google Trends:<br/><br/>http://www.google.com/trends?q=%22hd+radio%22%2C+xm%2C+sirius&ctab=0&geo=all&date=all<br/><br/>HD Radio/IBOC is dead.

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